The Impact of Remote Work Versus RTO on Retirement Planning

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Juggling successful retirement planning and remote, return to office (RTO), or hybrid options requires a bit of research and fancy footwork. How people do their jobs has changed since the pandemic. More are working from home (WFH). However, some employers are requiring RTO at least some of the time.

How you plan for retirement depends on factors such as whether you are an employee or contractor, and how aware you are of your company policies on 401(k) matching and your own savings.

Is Remote or In-Office Work Better for Retirement Planning?

USA Today surveyed 1,000 white-collar workers in the United States. The results showed that 33 percent of respondents work from home and another 33 percent in a hybrid role. About 36 percent said they preferred full-time WFH to some days at home and others in the office.

With many people working remotely full-time or on hybrid schedules, retirement planning looks different from a decade ago. In-office and WFH have pros and cons—employees must be proactive in retirement planning to save enough to live the lifestyle they want when they stop working. One isn’t better than the other, but each requires a different mindset.

1) Saving on Expenses as a WFH vs. In-Office Employee

Steady contributions over time are the root of a good retirement plan. Reducing expenses gives you more funds to throw into savings. Get an idea of how much money to save to have the monthly funds needed in retirement.

• Remote

Remote work is ideal for saving on expenses and throwing more funds into your retirement account. You’ll save on commuting, work clothes, and lunches out.

Since people can WFH anywhere, you may avoid transferring to a new city when getting a promotion. This could result in lower housing and cost of living expenses. All the extra money can go toward your 401(k) or into a Roth individual retirement account (IRA).

Conversely, you may make a bit less money working from home. You’ll miss some of the connections those working in-office make and could be overlooked for promotions and raises.

• RTO

Returning to the office could cost more in terms of daily expenses. You’ll have fuel or public transportation costs getting to and from work, which could be extensive since the average commute is about 28 minutes long. Add upkeep on your vehicle, work clothing costs, and lunches out.

At the same time, you may make more per hour, which could offset the extra expenses. Networking with higher-ups is easier when you are in the office at least a few days a week. You could make connections that bring raises and promotions to help you earn and save more for retirement.

2) Work/Life Balance as a Remote vs. In-Office Worker

Although you should start retirement planning as early as possible, you must live your life. Sacrificing a few things makes fiscal sense to have enough funds to save for later. However, never taking a vacation, buying a new car, or upgrading your home can be grueling. You have many years to live before you retire, so you should find the right mix of work/life balance and a slow and steady plan that makes sense for your goals.

If you are in your twenties, how much you must save each paycheck looks different than if you’re in your fifties and have zero saved. You must also consider your life goals. If you plan to retire by 40, you’ll want to save more to reach your objectives sooner. However, you might also have children in college and a mortgage to consider, which may require a long-term approach.

Determining how much to save and where depends on your company and work situation. Some people must take on a part-time job, do seasonal work, or start a side hustle to find extra funds to sock away.

• Remote

Remote workers tend to have a better schedule to ensure balance. They skip the commute times of their RTO counterparts. Their schedules are often more flexible if they have children to see off to school. As they avoid an hour’s drive to and from the office, they may have more time for what they enjoy.

A better work/life balance allows time for retirement planning and studying investment markets. Remote workers can start a side hustle in the time they typically drive to and from the office. They can study the markets and make smarter investment decisions.

Unfortunately, remote work has a few drawbacks. Determining how to delegate tasks when you work alone can be challenging, particularly when navigating getting ready to retire. For example, succession planning is often easier in person as it requires a consistent clear communication and ongoing support, and a lack of in-office interactions can cause the process to drag on or otherwise suffer. Talk to management about ways to improve the process remotely.

• RTO

While you will spend more time commuting to an office, you will also make connections with other workers. You could find a mentor or help someone new learn the ropes. The networking you complete in the office can allow you to delegate tasks and conduct succession planning more easily.

Unfortunately, you’ll have less time and flexibility when you work in the office. Unless your company offers in-house training on investing, you could lack the time to study the markets and make the most of your retirement savings.

5 Considerations When Choosing Remote Versus In-Office Work for Retirement Planning

If you have a choice between working from home or returning to the office, retirement planning should be top-of-mind when making your decision. Below are some specific considerations that may help you determine whether in-office or WFH life suits you better.

1) How Will You Find Insurance?

Funding for health care costs is a significant consideration in retirement planning. Employees may have an opportunity to continue coverage through their employers after retiring. Contracted workers, however, typically have no retirement plan or health benefits through work, and must seek them independently.

On the other hand, working from home can allow you to live a healthier lifestyle, making healthcare expenses less needed. WFH could give you extra time to go for a walk or flexibility to attend exercise classes during the day. You’ll be eating out less and cooking at home more, which is naturally healthier as you avoid additives restaurants put in their food.

Along with ongoing healthcare insurance costs, it’s a good idea to prepare for the unexpected with life insurance—the average funeral costs between $7,000 and $12,000, plus other expenses. The healthier you are at retirement, the lower your overall expenses for insurance and ongoing healthcare.

2) What Will Benefits and Retirement Savings Look Like?

Many businesses offer benefits such as a financial adviser, retirement planning courses, and 401(k) matching plans. Take full advantage if your employer provides matching funds for what you put in to ramp up your savings.

Remote workers may not fully understand what benefits are available to them. They should contact human resources and learn how to use the company policies best to help them retire when they want. Those who work in the office likely have a better grasp on the benefits and how they work but should still reach out to HR and any FAs working for the company.

Contracted remote workers typically do not have 401(k)s through their companies. They must save on their own with a self-employed plan or simple IRA. If you are middle-aged, you may want to play catch up. A Savings Incentive Match Plan for Employees (SIMPLE) IRA allows you to contribute to your savings as both the employee and employer with a $15,500 limit plus 2 percent from the employer contribution.

Although relying on a set amount from Social Security would be nice, many complain that the amounts don’t keep up with the cost of living changes.

3) What Kinds of Promotional Opportunities Will You Have?

Promotions can make a difference in your earnings and how much you can save. Working outside the office could impact your skill development as you’ll miss out on in-house workshops. You may have one project manager you report to, creating fewer eyes on your stellar work, which results in fewer opportunities for recognition and promotion.

Fewer promotions often mean lower income and less to save for retirement. While remote work is preferable for many, consider a hybrid approach, where you occasionally visit the office and meet with company leaders and coworkers to discuss big projects.

4) How Would You Navigate Taxes and Inconsistent Income From Self-Employment?

If you work specifically as a contracted remote employee, you’re considered a freelance or self-employed person. Around 53 million people in the United States are classified as freelancers. In this scenario, you’ll want to navigate several things to keep your retirement savings on par with your in-office counterparts.

You’ll pay a bit more in taxes as your employer doesn’t contribute like they do when you are on their payroll as a full-time worker. You’ll have to pay their portion, which can add up. You also must be diligent about paying estimated quarterly taxes or potentially accruing fines and penalties.

If you work for more than one company, you may find unpaid invoices or funds come in late. You may want a more flexible schedule for contributions to avoid the cash flow crunch so many entrepreneurs suffer.

5) Where Do You Want to Live Long-Term?

Remote workers have some options RTO employees do not. For example, you can move early if you know where to retire. You’ll buy your home at a lower rate as real estate value increases over time. You can move to a less expensive area now and save money without worrying about a long office commute.

Since remote workers can live virtually anywhere, you can look for an area with plenty of low-cost activities for seniors and low property taxes. Living in an area with a lower cost of living will allow you to keep a handle on rising expenses in the future. If you live in an area with high housing, such as on one of America’s coasts, you may be able to sell your current home and net enough profit to buy a house outright in another location.

However, remote workers will need to keep time differences in mind. If you work for a company in New York and relocate to Montana, the time difference may make work more challenging. An hour or two difference can impact when you can communicate with your employer and finish tasks on time. You’ll need to adjust your work hours or consider finding a position with a company in the same time zone.

Things to Ask Your Employer

Whether remote or in-office, find out about employer matches for 401(k) contributions, retirement planning help such as a financial adviser session, and other services to prepare you for the day you’ll quit working.

Some companies offer a Dave Ramsey class to help with budgeting and getting ahead of the overwhelming cost of daily living. The average person owes $103,358 in mortgages, credit cards, and other loans, such as student, vehicle, and personal debt.

Benefits such as meeting with a financial adviser can help you monitor your spending and secure the security you need to retire. Develop a plan to pay off your mortgage so you retire free of monthly housing payments. Eliminate student loan debt so you have more monthly funds to save.

Where Will the Future Take Retirement Planning and Remote and RTO Policies?

Now that the world has adapted to COVID-19 and the worst of the pandemic seems to be in the rearview mirror, many employers require remote employees to RTO at least some of the time. Workers over 50 have some crucial decisions about whether returning is worth it or if they should go ahead and retire.

One survey showed around 25 percent of people over 50 said RTO mandates would make it more likely they’d retire now. However, 43 percent would stay longer if they could work fully from home.

While there is less talk of a labor shortage, new jobs and fewer employees still give people some leverage as they seek positions in the workforce. Those demanding RTO or hybrid positions may hold out until they get them, forcing businesses to provide the option.

What Is Better for Your Retirement—RTO or Remote?

Remote and RTO workers can save for retirement if they understand each option’s pros and cons and plan accordingly. In-office staff may have advantages over contracted workers through company matches and life-stage planning opportunities. However, freelancers benefit from extra options such as SIMPLE IRAs and more control over transportation costs.

Your work location is far less crucial than the effort you put into saving what you’ll need to live comfortably after retirement. Planning is key.

By Eleanor Hecks

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